KALAMAZOO, MI – Don't expect a lot of drama in the area's industrial economy during the second half of 2014.

But don't expect a lot of excitement either, says local economist Brian Long, who surveys West Michigan manufacturers each month.

"Here in Kalamazoo, we saw a pickup in the month of April largely as a result of pent-up demand for just about all industrial products," Long said. "And that would include things related to automotive as well as our other manufactures in the area that make everything form cages for animals (Unifab) to Stryker Corp. and all those other companies. It wasn't all of them, but they showed just a little bit of an uptick."

That is not a bad thing, however, he said. But after that strong showing in April, growth among the area's manufacturers in late May "returned to the pattern of slow growth," he said.

"There were some people when they saw the sharp bounce in April's numbers, they thought it was the start of a more robust recovery," said Long, who produces a monthly report for the National Association of Purchasing Management.

Long, who is also director of Supply Chain Management Research at Grand Valley State University in Grand Rapids, surveys industrial purchasing managers during the last two weeks of each month and creates indexes based on their responses. His Index of New Orders for the last two weeks of April, which represents business improvement, jumped to +40, up from +27 in late March. His Index of New Orders for the last two weeks of May, fell to +20, down from the +40 a month earlier. Long asks purchasing managers if orders were up, down or unchanged from the previous month.

"Once that temporary bubble was gone, we were back down to slow growth again," Long said. But he said it's good and "growth is growth."

His Production Index, which asks purchasing managers if they expect production to ramp up, decrease or remain unchanged, dropped to +16 in late May, down from +28 in late April. Long's Employment Index, which asks if companies expect to increase, decrease or maintain staffing levels, rose slightly to +14, up from +13 in late April. Long's Index of Purchases, which asks purchasing managers if their level of purchasing activity is it up, down or the same, was down to +9 in late May, compared with +13 a month ago.

In Kalamazoo, he anticipated no surge in industrial activity.

"It will continue to this very slow progress that we're making," he said.The unemployment rate improved slightly in Kalamazoo and most Southwest Michigan counties in April, but was well below what it was 30 years ago. The April rate for Kalamazoo County was 7.8 percent, down from 8.8 percent in March.

"The city of Portage came in at 4.3 percent unemployment, which compared to the state (7.3 percent) and the United States (6.3 percent) is very good," he said. "But that same table shows that its 29-year low was 1.3 percent unemployment."

About the minimum wage

About the movement to lower the state's minimum wage rate, Long said, "Locally, the problem with the minimum wage and the controversy over it is when you raise the price of anything you reduce the demand for it. The first wave of the minimum wage will take affect on Sept. 1. It will result in fewer people being hired and, in more extreme circumstances, some people being let go."

But he said, "The good news is the people that are at or near minimum wage will now be receiving more per hour than they have in the past and that is good for the economy too. You have more disposable income and they are closer to break-even with the poverty line."

He said how businesses handle the increase in labor cost can vary depending on the industry. Fast food restaurants can pass the cost along, he said. People in a hurry will probably not balk if McDonald's raises the price of a Big Mac, for instance.

But businesses in the service industry tend to lose customers if they try to pass cost increases along, he said.

"Those with such businesses as lawn moving services, landscape services, (those) closer to marginal costs, will have a much more difficult time absorbing those costs," Long said. "They are the places you'll see the fewer hires or layoffs."

He said employment at small businesses will be most adversely affected because large businesses have proportionately fewer minimum-wage jobs.

Things to watch:

-A slowdown in automobile sales – "because we're selling lots of cars right now and we have to hope those sales will continue." Buying as a result of pent-up demand from the 2008-2010 recession has meant the auto industry is driving the state's economy. But Long worries that the buying will slow down before vehicle manufacturers adjust their production and result in too much inventory and layoffs at suppliers who have ramped up production.

-The world economy – "We're not an island and the rest of the world is not doing as well as the United States or Michigan," Long said. "Western Europe's numbers were off." He said investors and business tend to worry and hold back until they see what's happening in that part of the world." That could mean a slowdown in the U.S. economy.

Long said world events have the potential to cause seismic tremors in the economies of many countries, including the United States and West Michigan.